The Federal Reserve convened recently to consider adjustments to interest rates, ultimately opting to keep the current rates steady in the range of 4.25% to 4.5%. This decision aligns with economic trends, suggesting that growth is anticipated for the first quarter. Economists largely expected this outcome.
Melissa Cohn, regional vice president at William Raveis Mortgage, emphasized that the Fed’s rate is expected to remain unchanged. “[Federal Reserve Chair Jerome Powell] has emphasized that there is no urgency to implement rate cuts, especially in light of the Trump administration’s tariffs that could provoke renewed inflation, potentially complicating any future adjustments to rates,” Cohn noted.
The Fed acknowledged that while inflation is still a concern, the labor market remains robust, and unemployment has stabilized. To support economic performance closer to the target of 2% inflation, the committee affirmed its decision to maintain current interest rates.
Dr. Selma Hepp, chief economist at CoreLogic, pointed out that American households are increasingly wary of potential inflationary pressures affecting job security and financial stability, which may hinder significant spending. “As we monitor economic growth in the first quarter, it is clear that many households continue to feel the impact of previous inflation in housing and related services,” Hepp stated.
Despite gradual economic growth, consumer confidence remains fragile due to a series of social and political factors, including the recent implementation of tariffs. Anya Gezunterman, director at Imperial Fund Asset Management, remarked that the Fed’s ongoing battle against persistent inflation significantly affects daily living for Americans. “The central bank must also closely evaluate any price increases due to tariffs, which could prolong the need for elevated interest rates,” Gezunterman added.
Looking ahead, Gezunterman indicated that despite the economic landscape, mortgage rates are expected to gradually decrease over the summer, potentially by as much as one percentage point.
For those grappling with high inflation, taking out a personal loan might provide relief by consolidating debt at a lower interest rate, thus lowering monthly payments. Interested individuals can explore tailored interest rates through platforms like Credible without impacting their credit score.
INFLATION EASES IN FEBRUARY, BUT TRUMP TARIFFS COULD DERAIL PROGRESS
Two more rate cuts are predicted by the end of the year
While rates remained stable following the Fed meeting, there are indications that two rate cuts are anticipated this year. Many economists concur that consumers can expect these reductions in the near future. Analysts from Barclays project two quarter-point cuts to occur in June and September, revising their earlier forecast of a single cut in June.
“The changes in the labor market have prompted us to consider an additional rate cut, even amid persistent inflation,” reported Barclays analysts.
Barclays predicts that a slowing labor market will ultimately contribute to a rise in the unemployment rate, projected to peak at 4.3% in October. The anticipated rate reduction in June is expected to reflect this slower economic growth and rising unemployment, while the September cut is likely to indicate further increases in unemployment and potential stabilization in inflation figures.
To prepare for potential rate hikes, consumers might consider securing a personal loan as a method to manage high-interest debt better. Credible offers personalized loan rates without affecting credit scores.
MORTGAGE RATES HIT A TWO-MONTH LOW THIS WEEK, REMAIN UNDER 7%
Consumer confidence has dropped substantially in the last month
The recent Consumer Confidence Survey reveals a decline in public sentiment regarding the economy. This metric gauges Americans’ perceptions of business and economic conditions.
The Present Situation Index declined by 3.4 points to 136.5 in February, while the Expectations Index fell 9.3 points to 72.9. Generally, an Index score below 80 signals the possibility of an upcoming recession. This marks the lowest level for the Index since June 2024.
“February witnessed the most significant monthly drop in consumer confidence since August 2021,” stated Stephanie Guichard, senior economist at The Conference Board. “This marks three consecutive months of decline and brings the Index to the lower end of the established range since 2022. Attitudes regarding current labor conditions have soured, and there is growing pessimism about future business conditions and income prospects. Concerns about employment stability have reached a ten-month high.”
However, there are some signs of improvement, as more consumers are planning to purchase homes, likely spurred by a recent drop in mortgage rates. In contrast, intentions to buy cars and make larger purchases, such as televisions and electronics, have diminished.
Guichard noted that average inflation expectations for the next 12 months have climbed from 5.2% to 6% in February. This increase likely reflects a combination of ongoing inflation issues, particularly recent price surges in essential goods, and the anticipated effects of tariffs. “Mentions of trade and tariffs have surged to levels not seen since 2019,” she added.
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SENIORS TO GET MODERATE COST OF LIVING BUMP IN SOCIAL SECURITY PAYMENTS NEXT YEAR
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